<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 2, 1996
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-19674 94-2793941
(Commission File Number) (IRS Employer Identification No.)
47071 Bayside Parkway, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 226-4000
Not Applicable
(Former name or former address, if changed since last report.)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
Filing of Registration Statement on Form S-3
On December 2, 1996, SyQuest Technology, Inc. ("Registrant") filed a
Registration Statement on Form S-3 (the "Registration Statement") with respect
to the resale of up to 14,986,586 shares of Registrant's Common Stock by certain
Selling Stockholders (as described in the Registration Statement attached hereto
as Exhibit 99.1 and incorporated herein by this reference). As part of the
Registration Statement, Registrant updated the risk factors relevant to a
decision as to whether to invest in Registrant's Common Stock.
Item 7. Financial Statements and Exhibits
c) Exhibits
99.1 Registrant's Registration Statement on Form S-3, as filed with
the Securities and Exchange Commission on December 2, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
SYQUEST TECHNOLOGY, INC.
(Registrant)
Date: December 2, 1996 By /s/ Edwin L. Harper
--------------------------
Edwin L. Harper
President and Chief
Executive Officer
<PAGE>
Exhibit 99.1
<PAGE>
As filed with the Securities and Exchange Commission on December 2, 1996.
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SYQUEST TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2793941
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation Number)
or organization)
47071 BAYSIDE PARKWAY
FREMONT, CALIFORNIA 94538
(510) 226-4000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
EDWIN L. HARPER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SYQUEST TECHNOLOGY, INC.
47071 BAYSIDE PARKWAY
FREMONT, CA 94538
(510) 226-4000
(Name, address, including zip code and telephone number, including area code of
agent for service)
------------------------
COPIES TO:
M. GREG ALLIO
SHARTSIS, FRIESE & GINSBURG, LLP
ONE MARITIME PLAZA, EIGHTEENTH FLOOR
SAN FRANCISCO, CA 94111
(415) 421-6500
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box . [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Aggregate Registration Fee
Per Share (1) Offering Price (1)
<S> <C> <C> <C> <C>
Common Stock $.001
par value............ 14,986,586 $5.21875 $78,211,245 $23,700.38
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c), based on the high and low prices
reported in the Nasdaq National Market on November 22, 1996.
(2) Includes (i) a presently indeterminate number of shares issued or issuable
upon conversion of or otherwise in respect of Registrant's 7% Cumulative
Convertible Preferred Stock, Series 1, (ii) a presently indeterminate
number of shares issuable upon conversion of or otherwise in respect of
Registrant's Convertible Preferred Stock, Series 1, or pursuant to warrants
issuable upon such conversion, (iii) a presently indeterminate number of
shares issuable upon conversion of or otherwise in respect of Registrant's
5% Cumulative Convertible Preferred Stock, Series 2, or pursuant to
warrants issuable upon such conversion, (iv) 800,000 shares issuable upon
exercise of certain outstanding stock purchase warrants, and (v) 1,874,837
shares issued to four suppliers of Registrant as part of a restructuring by
Registrant of certain trade payables, as such numbers may be adjusted in
accordance with Rule 416.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 2, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SYQUEST TECHNOLOGY, INC.
14,986,586 SHARES
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
________________
All of the shares of Common Stock, par value $.001 per share ("Common Stock")
of SyQuest Technology, Inc., a Delaware corporation ("SyQuest" or the
"Company"), offered hereby are being offered for resale by certain stockholders
of the Company (the "Selling Stockholders") as described more fully herein. The
Company will not receive any proceeds from the sale of the shares offered
hereby. The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "SYQT." The last reported sales price of the Company's Common
Stock on the Nasdaq National Market on November 22, 1996, was $5.125 per share.
The shares of Common Stock offered hereby by the Selling Stockholders consist
of (i) a presently indeterminate number of shares issued or issuable upon
conversion or otherwise in respect of 20,000 shares of the Company's 7%
Cumulative Convertible Preferred Stock, Series 1, par value $.001 (the "7%
Cumulative Preferred Stock"), (ii) a presently indeterminate number of shares
issuable upon conversion or otherwise in respect of 5,500 shares of the
Company's Convertible Preferred Stock, Series 1 (the "Convertible Preferred
Stock") or pursuant to warrants issuable upon such conversion, (iii) a presently
indeterminate number of shares issuable upon conversion or otherwise in respect
of 24,500 shares of the Company's 5% Cumulative Convertible Preferred Stock,
Series 2 (the "Series 2 Preferred Stock") or pursuant to warrants issuable upon
such conversion, (iv) up to 800,000 shares issuable upon exercise of certain
outstanding stock purchase warrants (the "Stock Purchase Warrants") and (v) up
to 1,874,837 shares issued to four suppliers of the Company as part of a
restructuring by the Company of certain trade payables. For the purpose of
determining the number of shares of Common Stock to be registered hereby, the
number of shares of Common Stock calculated to be issuable in connection with
the conversion of the 7% Cumulative Preferred Stock, the Convertible Preferred
Stock and the Series 2 Preferred Stock and the exercise of warrants issuable
upon the conversion of the Convertible Preferred Stock and the Series 2
Preferred Stock is based on a market price of the Common Stock at the time of
such conversion of $5.00 per share, which price is below the closing sales price
of the Common Stock as of November 22, 1996 ($5.125 per share) and has been
arbitrarily selected. The shares offered hereby do not include 2,691,891
additional shares registered for resale by holders of the 7% Cumulative
Preferred Stock and another supplier of the Company that received shares as part
of a restructuring by the Company of certain trade payables, which shares have
been previously registered by the Company pursuant to Registration Statement No.
333-7369. The number of shares available for resale is subject to adjustment
and could be materially less or more than such estimated amount depending on
factors which cannot be predicted by SyQuest at this time, including, among
others, the future market price of the Common Stock. This presentation is not
intended, and should in no way be construed, to constitute a prediction as to
the future market price of the Common Stock. See "Risk Factors -- Convertible
Securities, Warrants and Options; Potential Dilution and Adverse Impact on
Additional Financing" and "Selling Stockholders."
The Selling Stockholders, directly or through agents, broker-dealers or
underwriters, may sell the Common Stock offered hereby from time to time on
terms to be determined at the time of sale, in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise. The Selling
Stockholders and any agents, broker-dealers or underwriters that participate in
the distribution of the Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, as amended (the "Act"), and any
commission received by them
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and any profit on the resale of the Common Stock purchased by them may be deemed
to be underwriting discounts or commissions under the Act. See "Use of
Proceeds" and "Plan of Distribution."
_______________________
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE 5 OF THIS PROSPECTUS.
___________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
All expenses of this offering will be paid by the Company except for
commissions, fees and discounts of any underwriters, brokers, dealers or agents
retained by the Selling Stockholders. Estimated expenses payable by the Company
in connection with this offering are approximately $85,700.38. See "Plan of
Distribution." The aggregate proceeds to the Selling Stockholders from the
Common Stock will be the purchase price of the Common Stock sold less the
aggregate agents' commissions and underwriters' discounts, if any. The Company
has agreed to indemnify the Selling Stockholders and certain other persons
against certain liabilities, including liabilities under the Act.
The date of this Prospectus is _____________, 1996
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and copied
at the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Common Stock of the Company is quoted on the Nasdaq
National Market. Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006. The Commission also maintains a World
Wide Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission.
A registration statement on Form S-3 with respect to the Common Stock offered
hereby (the "Registration Statement") has been filed with the Commission under
the Act. This Prospectus does not contain all of the information contained in
such Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is hereby made to the copy of such
contract or document filed as an exhibit to the Registration Statement. The
Registration Statement, including exhibits thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Section,
Securities and Exchange Commission, Washington, D.C. 20549, upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under the
Exchange Act are hereby incorporated by reference into this Prospectus:
1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, as amended on Form 10-K/A;
2) The Company's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1995, March 31, 1996, and June 30, 1996;
3) The Company's Proxy Statement for its annual meeting of stockholders
held on February 28, 1996;
4) The Company's Proxy Statement for its special meeting of stockholders
held on September 26, 1996;
5) The Company's Current Reports on Form 8-K dated October 27, 1995,
November 21, 1995, January 23, 1996, June 14, 1996, October 31, 1996,
as amended, November 11, 1996, November 25, 1996, and December 2,
1996; and
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<PAGE>
6) The Company's Registration Statement on Form 8-A registering the
Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in this Prospectus or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently-filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or into
such documents). Such request may be directed to SyQuest Technology, Inc.,
47071 Bayside Parkway, Fremont, California 94538, telephone (510) 226-4000,
Attn: Henry Montgomery, Executive Vice President, Finance and Chief Financial
Officer.
___________________
"SyQuest" is a registered trademark of the Company, "EZ135," and "EZ Flyer"
and "SyJet" are trademarks of the Company. This Prospectus also includes
trademarks of companies other than SyQuest Technology, Inc.
THE COMPANY
The Company designs, develops, manufactures, and markets removable hard
disk cartridges, associated disk drives and free-standing storage systems. The
Company's products combine the advantages of fixed hard disk drives with the
benefits of removability, which include unlimited incremental expansion of data
storage capacity, transfer and sharing of data and software among personal
computers, and backup, archival storage and physical security of data. The
Company's principal products have been 5.25 inch and 3.5 inch cartridges, drives
and storage systems used with personal computers and work stations manufactured
and sold by manufacturers of such products. These products are typically
purchased by distributors, mail order firms, national retail chains, value added
resellers, original equipment manufacturers ("OEMs") for integration into their
equipment, government contractors and others for resale to the end users.
The Company's principal executive offices are located at 47071 Bayside
Parkway, Fremont, California 94538, telephone (510) 226-4000.
4
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FOLLOWING
RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION
IN THIS PROSPECTUS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
THE DISCUSSION IN THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, BELIEFS, EXPECTATIONS
AND INTENTIONS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THE FOLLOWING RISK FACTORS, AS WELL AS
FACTORS DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE CAUTIONARY STATEMENTS MADE
IN THIS PROSPECTUS SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-
LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS.
NEED FOR ADDITIONAL FINANCING; FUTURE CAPITAL NEEDS.
The Company has incurred losses in its fiscal year ended September 30,
1995, and in each quarter of its fiscal year ended September 30, 1996. To meet
its working capital needs, the Company has engaged in a series of financing
transactions.
In June 1996, the Company closed the sale of 20,000 shares of 7% Cumulative
Preferred Stock for $20 million in gross proceeds. In July 1996, the Company
issued a 6% Convertible Subordinated Debenture (the "Debenture") to one of its
suppliers, of which a portion is convertible into Common Stock of the Company.
Subsequently, the Company worked out repayment schedules with its major
suppliers and converted approximately $50.8 million of accounts payable and
other obligations to notes payable reflecting extended repayment terms. From
late September 1996, through October 30, 1996, the Company exchanged with four
of these suppliers approximately $11.57 million of notes payable for 1,874,837
shares of Common Stock in the aggregate. In October 1996, the Company sold
5,500 shares of Convertible Preferred Stock for $5.5 million in gross proceeds
and sold 24,500 shares of Series 2 Preferred Stock for $24.5 million in gross
proceeds. In November 1996, the Company sold 1,500,000 shares of its Common
Stock for approximately $8.5 million to an international investment firm and
granted that investor warrants to purchase up to 1,875,000 shares of Common
Stock, depending on, among other things, the number of shares of Common Stock
owned by such investor on July 12, 1997, all as described in the Company's
Current Report on Form 8-K dated November 11, 1996.
As of September 30, 1996, the Company had $3.3 million in unrestricted cash
and cash equivalents. During the nine months ended June 30, 1996, the Company
used $32.7 million of cash in operating activities and an additional $13.3
million of cash for the purchase of equipment and leasehold improvements. The
Company believes that, based on a number of events occurring, the current
sources of financing available to the Company will be sufficient to fund only
the Company's operations into the second quarter of its fiscal 1997, and the
Company will need additional funds for new product introduction, to increase
production capacity and to pay suppliers. The Company will require additional
funds during its second quarter in the 1997 fiscal year or thereafter to finance
its operations. The Company is presently negotiating other possible equity
investments into the Company but there can be no assurance that any of such
negotiations will be successful. The precise amount and timing of the Company's
funding needs cannot be determined at this time, and will depend upon a number
of factors,
5
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including the market demand for the Company's products, the progress of the
Company's product development efforts, the availability of critical components,
the Company's strategic alliances, if any, for the manufacture of its products,
and the Company's inventory management. If additional funds are raised through
the issuance of equity securities, the percentage ownership of the stockholders
of the Company will be reduced, stockholders may experience additional dilution,
and such securities may have rights, preferences and privileges senior to those
of holders of the Company's Common Stock. See "Risk Factors -- Convertible
Securities, Warrants and Options; Potential Dilution and Adverse Impact on
Additional Financing." There can be no assurance that funds required by the
Company in the future will be available on terms satisfactory to the Company.
The inability to obtain needed funding on satisfactory terms would have a
material adverse effect on the Company's business and financial results.
RISK OF LOSING NASDAQ LISTING.
On September 16, 1996, the Company was given a temporary exception from the
net tangible asset and capital surplus listing requirements of the Nasdaq
National Market. The listing exception was conditioned on the Company's ability
to file a pro forma balance sheet as of September 30, 1996, indicating net
tangible assets of at least $2.0 million. On October 31, 1996, the Company
filed with Nasdaq and the Commission an unaudited pro forma balance sheet (the
"Pro Forma Balance Sheet") showing approximately $7.454 million in net tangible
assets, based on the Company's estimates of its losses for the fiscal year ended
September 30, 1996, the exact amount of which will not be determined until
completion of the audit of the Company's financial statements for that fiscal
year. No assurance can be given that such estimates will prove to have been
correct. Based on this filing, the National Association of Securities Dealers
approved the continued listing of the Company's Common Stock on the Nasdaq
National Market.
The Company has continued to incur losses, however, and there can be no
assurance that the Company will continue to meet the net tangible asset, capital
and surplus, or other listing requirements of the Nasdaq National Market in the
future. Should the Company fail to meet such listing standards, it may be
delisted from the Nasdaq Stock Market. Trading, if any, in the listed
securities would thereafter be conducted on the Electronic Bulletin Board or the
National Quotation Bureau's "pink sheets." As a result, an investor may find it
difficult to dispose of, or to obtain accurate quotations of the price of, the
Company's securities. This would likely have a material and adverse effect on
the market price of the Company's Common Stock and on the Company's ability to
raise additional capital.
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS; POTENTIAL DILUTION AND ADVERSE
IMPACT ON ADDITIONAL FINANCING.
As of October 31, 1996, the Company had outstanding options and warrants to
purchase an aggregate of 3,448,938 shares of Common Stock, at a weighted average
exercise price of $7.127731164 per share. The Company is also obligated to
issue additional warrants to acquire up to 2,871,392 shares of Common Stock and
up to 11,692,659 shares of Common Stock upon conversion of the 7% Cumulative
Preferred Stock, the Convertible Preferred Stock and the Series 2 Preferred
Stock (the "Preferred Stock"), based on the conversion prices of the Preferred
Stock at November 22, 1996. The exact number of shares of Common Stock issuable
upon conversion of Preferred Stock and exercise of warrants issued pursuant to
such conversion cannot be estimated with certainty because, generally, such
issuances of Common Stock will vary inversely with the market price of the
Common Stock at the time of such conversion, and there is no cap on the number
of shares of Common Stock that may be issuable. The number of warrants and
shares of Common Stock issuable upon conversion of the Preferred Stock is also
subject to various adjustments to prevent dilution resulting from stock splits,
stock dividends or similar transactions. Further,
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the Company may, at its election, choose to issue additional shares of Common
Stock in lieu of cash dividends due to the holders of the 7% Cumulative
Preferred Stock and the Series 2 Preferred Stock.
In addition, on November 13, 1996, SyQuest sold to an investor an
additional 1,500,000 shares of Common Stock that will become freely tradeable,
subject to compliance with applicable securities laws, on approximately February
12, 1997. As part of this same transaction, the Company issued a warrant that
will become exercisable for between 375,000 shares and 1,875,000 shares of
Common Stock, depending on a number of factors.
To the extent that such options and warrants are exercised, shares of
Common Stock are issued in lieu of cash dividends or convertible securities are
converted (and the warrants issuable upon such conversion are exercised),
substantial dilution of the interests of the Company's stockholders is likely to
result and the market price of the Common Stock may be materially adversely
affected. Such dilution will be greater if the future market price of the
Common Stock decreases. For the life of such warrants, options and convertible
securities the holders will have the opportunity to profit from a rise in the
price of the underlying securities. The existence of such warrants, options and
convertible securities is likely to affect materially and adversely the terms on
which the Company can obtain additional financing, and the holders of such
warrants, options and convertible securities can be expected to exercise them at
a time when the Company would otherwise, in all likelihood, be able to obtain
additional capital by an offering of its unissued capital stock on terms more
favorable to the Company than those provided by such warrants, options and
convertible securities.
The Company has filed a Registration Statement on Form S-8 under the Act to
register shares of Common Stock subject to stock options that will permit the
resale of such shares, subject to Rule 144 volume limitations applicable to
affiliates of the Company and vesting restrictions. The Company has also
registered the Common Stock issuable upon exercise of the warrants and
conversion of the convertible securities, certain of which are being offered
pursuant to this Prospectus. Additional shares of Common Stock issuable upon
conversion of the 7% Cumulative Preferred Stock are being offered pursuant to a
prospectus included in Registration Statement No. 333-7369. Such registered
shares can be sold without any holding period or sales volume limitations.
UNCERTAINTY OF MARKET ACCEPTANCE OF PRODUCTS.
The Company's future success will depend upon market acceptance of its new
products and upon the Company's ability to establish its new products as
industry standards. The Company introduced its EZ Flyer 230 in June 1996. The
EZ Flyer 230 is a newly designed product for the Company with 230 megabyte
capacity, which the Company began to ship in significant volume in July 1996.
While the Company believes that early indications of market acceptance of the EZ
Flyer 230 are favorable, the product has only recently been introduced and there
can be no assurance that the level of acceptance will continue or grow due to
uncertainties regarding the market for the EZ Flyer 230 and the competition it
is facing. The Company continues to refine the EZ Flyer 230 and there can be no
assurance that the Company will not experience problems or delays if and when it
attempts to manufacture and ship the EZ Flyer 230 in higher volumes.
On August 7, 1996, the Company announced that it had commenced taking
orders for its new 3 1/2 inch, 1.5 gigabyte SyJet system products. The Company
commenced a limited beta test shipment in September. The Company has begun
limited production and intends to increase production and shipments in December;
however, there can be no assurance that the Company will be able to introduce
this new product successfully and in a timely manner or that the product will be
accepted in the market.
7
<PAGE>
The SyQuest technology is different from the most widely used data storage
devices today (hard disk drives, floppy disk drives and CD-ROM drives). No new
type of read/writable data storage device has achieved widespread market
acceptance in recent years and there can be no assurance that the Company's new
products will achieve market acceptance. Whether the Company's new products
will achieve significant market acceptance will depend upon a number of factors,
including the price, performance and other characteristics of competing
solutions introduced by other vendors, the timing of the introduction of such
products, and the success of the Company in establishing OEM arrangements for
the Company's new products. See "Risk Factors - Competition" and "Shortages of
Critical Components; Absence of Supply Contracts; Supplier Workouts." There can
be no assurance that the Company will be successful in satisfying any of these
factors. In addition, the two formats of removable-media storage which have
gained widespread market acceptance to date--floppy disk drives and CD-ROM
drives--are both used by software manufacturers as a means of software
distribution. The Company's products are not currently used for software
distribution. The failure of the Company's new products to achieve widespread
commercial acceptance would have a material adverse effect on the Company's
business.
INTRODUCTION OF EZ FLYER 230; DISCONTINUATION OF EZ135.
The Company's EZ135 products accounted for 16% of the Company's sales in
the last quarter of fiscal 1995, 42% in the first quarter of fiscal 1996, 46% in
the second quarter of fiscal 1996, 45% in the third quarter of fiscal 1996 and
approximately 16% in the fourth quarter of fiscal 1996. Although sales of EZ135
products contributed significantly to the Company's revenue during the last
quarter of the 1995 fiscal year and the majority of fiscal year 1996, the
Company sold EZ135 units at a significant loss due to cost issues which could
not be corrected as the Company had originally anticipated, and due to
competitive pressures requiring the selling price to continue to decline in the
market. The Company discontinued sales of the EZ135 during the fourth quarter
of fiscal 1996.
The Company introduced its EZ Flyer 230 on June 3, 1996. Commercial
shipments of the EZ Flyer 230 commenced in June 1996, and the Company began to
ship the EZ Flyer 230 in significant volume in July 1996. There can be no
assurance that early indications of market acceptance of the EZ Flyer 230 will
continue or that the level of acceptance will grow.
SHORTAGES OF CRITICAL COMPONENTS; ABSENCE OF SUPPLY CONTRACTS; SUPPLIER
WORKOUTS.
Many components incorporated in, or used in the manufacture of, the
Company's products are currently only available from sole source suppliers.
During the 1996 fiscal year, the Company experienced disruption in its supply of
certain components for a number of reasons including the shortage of cash to pay
suppliers. Component shortages due to limited cash availability affected the
Company's ability to produce EZ Flyer 230 products and limited the Company's
ability to implement certain cost reduction and productivity improvement plans.
Moreover, the Company may continue to experience difficulty in the future in
obtaining a sufficient supply of many key components due to the shortage of cash
to pay suppliers and other reasons.
The Company recently completed the process of working out repayment terms
with its key suppliers. On July 15, 1996, the Company issued the Debenture to
one of its suppliers pursuant to which up to 400,000 shares of Common Stock
could be issued to such supplier at a conversion price of $6.9375 per share.
Subsequently, the Company negotiated with four other suppliers to extend the
payment dates on amounts owed, converting approximately $50.8 million of
accounts payable and other obligations to notes payable to reflect the extended
repayment terms. In September and October 1996, the Company received those
notes payable from those suppliers in exchange for an aggregate of 1,874,837
shares of
8
<PAGE>
Common Stock. As a result of the Company's completion of recent financing
transactions and other efforts by management to improve SyQuest's balance sheet,
a number of Company suppliers have begun a transition away from doing business
with the Company on a C.O.D. basis and will do business on terms. Many of
SyQuest's key suppliers are continuing to do business with SyQuest on a C.O.D.
basis only, however, which places demands on the Company's available cash
resources that may limit its financial flexibility and its ability to meet
market demand for its products.
The Company purchases all of its sole and limited source components and
equipment pursuant to purchase orders placed from time to time and has no
guaranteed supply arrangements. The inability to obtain sufficient components
and equipment, to obtain or develop alternative sources of supply at competitive
prices and quality, or to avoid manufacturing delays could prevent the Company
from producing sufficient quantities of its products to satisfy market demand,
result in delays in product shipments, increase the Company's material or
manufacturing costs, or cause an imbalance in the inventory level of certain
components. Moreover, difficulties in obtaining sufficient components may cause
the Company to modify the design of its products to use a more readily available
component, and such design modifications may result in increased costs and
product performance problems. Any or all of these problems could in turn result
in the loss of customers, provide an opportunity for competing products to
achieve market acceptance and otherwise adversely affect the Company's business
and financial results.
COMPETITION.
The data storage industry is highly competitive. The Company believes that
its products compete most directly with other removable-media data storage
devices, such as disk drives offered by Iomega Corporation and magneto optical
disk drives. Although the Company believes that its products offer performance
and certain other advantages over most other removable-media storage devices
available today, the Company believes that the price/performance levels of
existing removable-media products will improve and that other companies will
introduce new removable-media storage devices. Accordingly, the Company
believes its products will face increasingly intense competition. In particular,
a consortium comprising Compaq Computer, 3M, Insite and Matsushita-Kotobuki
Electronics Industries Ltd. has announced and is selling the LS120, a high-
capacity floptical drive that is compatible with conventional floppy disks.
Each of Mitsubishi Electric Corp. and Mitsumi has also announced that it plans
to manufacture a high capacity, floppy drive that is downward compatible with
existing floppy diskettes. If successfully marketed, these drives would compete
with the Company's EZ products. The Iomega Zip drive, a high capacity floppy
disk drive, is a competitor to EZ Flyer 230. The JAZ drive is Iomega's first
removable hard drive and competes directly with SyQuest's products. In
addition, to the extent that SyQuest drives are used for incremental primary
storage capacity, they also compete with conventional hard disk drives. In
addition, the leading suppliers of conventional hard disk drives could at any
time determine to enter the removable-media storage market.
As new and competing removable-media storage solutions are introduced, it
is possible that the first such solution to achieve a significant market
presence will emerge as an industry standard and achieve a dominant market
position. If such is the case, there can be no assurance that the Company's
products would achieve significant market acceptance, particularly given the
Company's size and market position relative to its competitors.
9
<PAGE>
TECHNOLOGICAL CHANGE AND NEW PRODUCTS.
The Company operates in an industry that is subject both to rapid
technological change and rapid change in consumer demands. For example, over
the last 10 years the typical hard disk drive included in a new personal
computer has increased in capacity from approximately 40 megabytes (MBs) to 1
gigabyte (GB) or more, while the price of a hard disk drive has remained
constant or even decreased. The Company's future success will depend in
significant part on its ability continually to develop and introduce, in a
timely manner, new removable disk drive products with improved features, and to
develop and manufacture those new products within a cost structure that enables
the Company to sell such products at lower prices than those of comparable
products today. In addition, the Company depends on technological developments
from other vendors for the components in its products (such as heads,
semiconductor devices and media). The Company has recently introduced its EZ
Flyer 230 which is targeted for sale to the Company's traditional customer base
in the desktop publishing, prepress and service bureau segments, as well as to a
broad array of users in the SOHO (Small Office/Home Office) market segment. The
SyJet 1.5 GB removable cartridge hard drive is targeted towards computer, audio
and video OEMs, as well as retail, the Company's traditional customer base and
the SOHO market segment. The Company believes that this product will compete
with the Iomega JAZ. There can be no assurance that the Company will be
successful in developing, manufacturing and marketing new and enhanced products
(including the EZ Flyer 230 and the SyJet 1.5 GB) that meet both the performance
and price demands of the data storage market.
DEPENDENCE ON STRATEGIC MARKETING ALLIANCE.
The Company's business strategy depends in significant part on establishing
successful strategic alliances with a variety of key companies within the
computer, audio and video industries. Among the types of alliances contemplated
by the Company's business strategy are: OEM arrangements with personal
computer, audio and video manufacturers that will include SyQuest products as a
standard feature or factory-installed option in their personal computers;
reseller arrangements (including private and co-branding arrangements) with
major vendors of computer products covering the resale of the Company's products
by such companies; and licensing arrangements under which the Company grants
certain computer manufacturers on a royalty-bearing basis the right to
manufacture and sell its drives or media. Moreover, the Company believes that
establishing strategic alliances (especially OEM arrangements) is critical to
the success of its business, and there can be no assurance that the Company will
be successful in doing so. In addition, the Company's strategic alliances are
generally not covered by binding contracts and may be subject to unilateral
termination by the Company's strategic partners, and may also require the
Company to share control over its manufacturing and marketing programs and
technologies.
RELIANCE ON MANUFACTURING RELATIONSHIPS; NOMAI LAWSUITS.
The Company plans to use independent parties to manufacture for the Company
a portion of the Company's components. The Company currently has manufacturing
relationships with Nomai, S.A. ("Nomai") for cartridges and others for
manufacture and subassembly of components, but the Company has filed lawsuits
against Nomai in France alleging copyright and patent infringement and in the
United States regarding various related claims, including royalty payments owed
by Nomai under a previous arrangement. On November 18, 1996, the Company and
Herve Frouin and Marc Frouin (the "Frouins"), owners of a controlling interest
in Nomai, announced the execution of a letter of intent proposing a transaction
(the "Proposed Transaction") in which the Company would acquire a controlling
interest in Nomai from the Frouins in exchange for 3,422,968 shares of the
Company's Common Stock, and would commence a tender offer to acquire up to 100%
of the publicly held shares of Nomai. On November 25,
10
<PAGE>
1996, however, the Company announced that plans to acquire Nomai have been
terminated, adding that it intends to pursue vigorously all available causes of
action against Nomai.
In September 1996, the Company and Legend Group ("Legend"), the largest
computer systems manufacturer and distributor in the People's Republic of China,
announced an intention to form a joint venture company for the manufacture and
distribution of the Company's removable cartridge hard drives and products in
China. In addition, the joint venture would become the exclusive distributor of
Company products in the developing Chinese market. The Company would provide
the proposed joint venture company with training and manufacturing know-how to
insure that the joint venture had the requisite skills to produce Company
products for the manufacture of removable cartridge hard drives. It is
anticipated that both Legend and the Company would contribute the capital
required for the joint venture. The Company and Legend have entered into a
Memorandum of Understanding under which Legend would invest up to $20 million in
the Company. The definitive terms of this investment are being negotiated, and
the completion of any such investment (currently proposed for the first quarter
of 1997) may require approval of the Company's stockholders pursuant to Nasdaq
listing rules and may be subject to a waiting period pursuant to the Hart-Scott-
Rodino Act.
There can be no assurance that the Company will be successful in
prosecuting its lawsuit against or in maintaining its manufacturing
relationships with Nomai, that the joint venture or financing agreement with
Legend will be consummated or successful, or that the Company will successfully
establish additional relationships in the future or manage such manufacturing
relationships. The lawsuit against Nomai and either the completion of or
failure to complete the proposed transactions with Legend could have numerous
consequences that could affect the Company materially and adversely. The
Company's manufacturing relationships are generally not covered by binding
contracts and may be subject to unilateral termination by the Company's
manufacturing partner. Moreover, there can be no assurance that third-party
manufacturers will be willing or able to meet the Company's quantity or quality
requirements for manufactured products.
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS.
The Company has experienced and in the future may continue to experience
significant fluctuations in its quarterly operating results. Factors such as
price reductions, the introduction and market acceptance of new products,
product returns, the availability of critical components and the lower gross
margins associated with the Company's newly introduced products could contribute
to this quarterly variability. Moreover, the Company's expense levels are based
in part on expectations of future sales levels, and a shortfall in expected
sales could therefore result in a disproportionate decrease in the Company's
results of operations. As a result of these and other factors, it is likely
that the Company's operating results in some future period will be below the
expectations of investors, which would be likely to result in a significant
reduction in the market price of the Common Stock.
DEPENDENCE ON PROPRIETARY TECHNOLOGY.
The Company's success depends heavily on the establishment and maintenance
of proprietary technologies. The Company relies on a combination of patent,
copyright and trade secret law to protect the technology in its drives and
cartridges. The Company holds numerous U.S. and foreign patent applications
relating to its drives and hard disk cartridges. Many of these patents,
however, do not pertain to the Company's recent product generations, and there
can be no assurance that additional patents will issue in the future. There can
be no assurance that the steps taken by the Company to protect its technology
will be adequate to prevent misappropriation of its technology by third parties,
or that third
11
<PAGE>
parties will not be able independently to develop similar technology. In
particular, the Company's sales have been and will continue to be materially
adversely affected when parties develop cartridges compatible with the Company's
disk drives.
From time to time the Company receives notices alleging that the Company's
products infringe third party proprietary rights. A third party notified the
Company in June 1995, that such party believes the Company infringes on six of
its U.S. patents. It is the Company's belief that the claims are without merit
or that the infringement claims relate to component parts purchased from
vendors. The Company also believes that if the third party prevails on its
claims, the Company will be indemnified by its vendor for any liability arising
from the alleged infringements and that this matter will not have a material
effect upon its financial condition or results of operations.
Patent and similar litigation frequently is complex and expensive and its
outcome can be difficult to predict. There can be no assurance that the Company
will prevail in any proceedings that may be commenced against the Company. In
addition, certain technology used in the Company's products is licensed from
third parties. The termination of any such license arrangements could have a
material adverse effect on the Company's business and financial results.
INTERNATIONAL OPERATIONS.
International sales generated a significant portion of the Company's
revenues in fiscal years 1995 and 1996, and the Company expects international
sales to continue to constitute a significant percentage of its total sales in
the future. The international portion of the Company's business is subject to a
number of inherent risks, including difficulties in building and managing
foreign operations and foreign reseller networks, the differing product needs of
foreign customers, fluctuations in the value of foreign currencies, import-
export duties and quotas, and regulatory, economic or political changes.
Moreover, the Company relies on foreign companies for the supply of certain
critical components and is increasingly relying on foreign companies for the
manufacture of certain of its products, and these relationships may be subject
to some of the same risks affecting its international sales. There can be no
assurance that these factors will not materially and adversely affect the
Company's international sales and its overall business and financial
performance.
The Company's international sales are predominantly denominated in U.S.
dollars. Accordingly, a significant increase in the valuation of the U.S.
dollar and the resultant increase in the price of the Company's foreign currency
priced products could have a material adverse effect on the Company's sales.
MANAGEMENT CHANGES; DEPENDENCE ON KEY PERSONNEL.
The Chairman of the Board, the President and Chief Executive Officer, the
Chief Financial Officer, the Executive Vice President-Sales, the Chief Technical
Officer and the Executive Vice President-Operations, have all just recently
joined the Company. Syed Iftikar, the Company's former Chairman of the Board,
President and Chief Executive Officer, ceased to be an officer of the Company
on June 13, 1996 and resigned as a director on August 15, 1996.
The Company's success will depend in large part upon the capabilities of
the new management team. The inability of such individuals to become familiar
with the widespread operations of the Company and its subsidiaries and turn
around the financial situation of the Company could have a material adverse
effect on the Company. The Company's success will also depend in significant
part upon its ability to attract and retain highly-skilled management and other
personnel. Competition for such
12
<PAGE>
personnel in the computer industry is intense, and the Company has from time to
time experienced difficulty in finding sufficient numbers of qualified
professional and production personnel. The Company has had a number of other
executive officers leave the Company over the last six months. There can be no
assurance that the Company will be successful in attracting and retaining the
quantity and quality of personnel that it needs.
VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS.
The market prices for shares of high technology companies including the
securities of SyQuest have been volatile. The Company's Common Stock has
recently experienced substantial levels of short selling, which has depressed
the market price, and increased the volatility of the market price, of the
Company's Common Stock. Factors such as announcements of technological
innovations or new products by the Company or its competitors, variations in the
Company's quarterly operating results, continued high levels of short selling of
the Common Stock, or general economic or stock market conditions unrelated to
the Company's operating performance may have material adverse effects on the
market price of the Common Stock. In the past, following periods of volatility
in the market price of a company's securities, securities class action
litigation has often been instituted against such a company. Such litigation,
if instituted against the Company, could result in substantial costs and a
diversion of management attention and resources. See "Risk Factors - Class
Action and Shareholder Derivative Lawsuits."
In addition, the Company believes that electronic bulletin board postings
regarding the Company on America Online and other similar services, certain of
which have in the past contained false information about Company developments,
have in the past and may in the future contribute to volatility in the market
price of the Common Stock. Any information concerning the Company, including
projections of future operating results, appearing in such on-line bulletin
boards or otherwise emanating from a source other than the Company should not be
relied upon as having been supplied or endorsed by the Company.
The Company has not paid any cash dividends since its inception, and it
does not anticipate paying cash dividends in the foreseeable future.
CERTAIN MARKETING AND SALES RISKS.
As is common practice in its industry, the Company's arrangements with its
customers generally allow customers, in the event of a price decrease, credit
equal to the difference between the price originally paid and the new decreased
price on units in the customers' inventories on the date of the price decrease.
When a price decrease is anticipated, the Company establishes reserves for
amounts it estimates will be reimbursed to qualifying customers. There can be
no assurance that these reserves will be sufficient or that any future returns
or price protection charges will not have material adverse effects on the
Company's results of operations, particularly because future results will depend
heavily on recently introduced products for which the Company has little or no
operating history. In addition, customers generally have stock rotation rights
permitting them to return slower-moving products in inventory within specified
time periods in return for compensating orders of other products. Any build-up
of inventory at the Company or in its distribution channels that does not sell
through to end users could have material adverse effects on the Company's
operating results and financial condition.
As is typical in the industry, from time to time the Company experiences
product defects and product returns. There can be no assurance that the Company
will not experience quality or reliability problems in the future that have
material adverse effects on the Company's business and financial results.
13
<PAGE>
The Company markets its products primarily through computer product
distributors and retailers. Distribution channels for personal computers and
accessories have been characterized by rapid change, including consolidation and
financial difficulties of distributors. The loss or ineffectiveness of any of
the Company's major distributors could have a material adverse effect on the
Company's results of operations. In addition, since the Company grants credit
to its customers, a substantial portion of outstanding accounts receivable are
due from computer product distributors and certain large retailers. At
September 30, 1996, the customers with the three highest outstanding accounts
receivable balances totaled $12.03 million, or 28.9%, of gross accounts
receivable. The Company has no reason to believe these receivable balances are
uncollectible, but if any one or a group of these customers' receivable balances
should be deemed uncollectible, it would have a material adverse effect on the
Company's results of operations and financial condition.
EFFECT OF ANTI-TAKEOVER PROVISIONS.
The Company's Board of Directors has the authority to issue up to 4,000,000
shares of preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the Company's
stockholders. To date, an aggregate of 50,000 shares of preferred stock have
been issued: 20,000 shares of 7% Cumulative Preferred Stock; 5,500 shares of
Convertible Preferred Stock and 24,500 shares of Series 2 Preferred Stock. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of these preferred shares and any
preferred stock that may be issued in the future. Such issuance, while
providing desirable flexibility in connection with possible financings and
acquisitions and other corporate purposes, could make it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. In addition, preferred stock may have other rights, including economic
rights, senior to the Common Stock, and, as a result, the issuance thereof could
have a material adverse effect on the market value of the Common Stock. The
Company is also subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person first becomes an
"interested stockholder," unless the business combination is approved in a
prescribed manner. The application of Section 203 could also have the effect of
delaying or preventing a change of control of the Company.
CLASS ACTION AND SHAREHOLDER DERIVATIVE LAWSUITS.
The Company has been named as a defendant in four putative class action
lawsuits. Two of the actions, Ravens, et al. v. Iftikar, et al. (filed April 2,
---------------------------------
1996) and Bellezza, et al. v. Iftikar, et al. (filed May 24, 1996) have been
-----------------------------------
brought in the United States District Court for the Northern District of
California and have been assigned to the Honorable Vaughn Walker (collectively,
the "Federal Lawsuit"). Certain current and former officers and directors also
have been named as defendants in the Federal Lawsuit. Plaintiffs have
petitioned the Court to consolidate the foregoing complaints into one
consolidated action. That request, as well as other procedural matters which
arose during a July 18, 1996, case management conference, is under
consideration. The plaintiffs in the Federal Lawsuit purport to represent a
class of all persons who purchased the Company's Common Stock between October
21,1994 and February 1, 1996. The Federal Lawsuit alleges that the defendants
violated the federal securities laws through material misrepresentations and
omissions. The purported class action entitled Gary S. Kaufman v. SyQuest
--------------------------
Technology Inc., et al. was filed on March 25, 1996, in the Superior Court of
- -----------------------
the State of California for the County of Alameda. Certain current and former
executive officers and directors of the Company are also named as defendants in
the lawsuit. The plaintiffs in the State Lawsuit purport to represent a class
of all persons who purchased the Company's Common Stock between May 2, 1995,
14
<PAGE>
and February 2, 1996. The Kaufman complaint alleges that defendants violated
-------
various California laws through material misrepresentations and omissions. The
Complaint seeks unspecified damages. The purported class action entitled
Ravens, et al. v. Iftikar, et al., was filed on October 11, 1996 in the Superior
- ---------------------------------
Court of the State of California for the County of Alameda. The Ravens
------
complaint alleges that SyQuest and certain of its former officers and directors
violated various California laws through material representations and omissions
between October 21, 1994 and February 2, 1996, and is purportedly brought on
behalf of persons who purchased stock during that period. The complaint seeks
unspecified damages. This action has been consolidated with the Kaufman action,
-------
discussed above. Plaintiffs are preparing a consolidated complaint.
On May 14, 1996, the Company was served with a shareholder's derivative
action filed in Alameda County, California, Superior Court entitled John Nitti,
-----------
et al. v. Syed Iftikar, et al. On July 22, 1996, plaintiffs filed an amended
- ------------------------------
complaint. The action seeks to recover unspecified damages and punitive damages
on behalf of the Company from current and former officers and directors of the
Company for alleged breach of fiduciary duty, unjust enrichment and waste of
corporate assets. The Company is a nominal defendant in the action. The
complaint alleges that the officers and directors issued false and misleading
information and sold shares of the Company's stock at artificially inflated
prices. The allegations are essentially the same as those in the putative class
actions.
While the Company intends to vigorously defend the lawsuits, there can be
no assurance as to what financial effect the pending litigation may have on the
Company.
USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered
hereby are solely for the account of the Selling Stockholders. Accordingly, the
Company will receive none of the proceeds from the sale thereof. However,
certain of the shares of Common Stock offered hereby are issuable in the future
upon the exercise of the outstanding or issuable warrants, and the Company will
receive the exercise prices payable upon any exercise of the warrants. There
can be no assurance that all or any part of the warrants will be exercised.
SELLING STOCKHOLDERS
The Selling Stockholders are (i) certain creditors of the Company who
acquired Common Stock in exchange for cancellation of certain trade payables of
the Company, and (ii) certain persons who have provided equity financing to the
Company. The shares covered by this Prospectus are being registered so that the
Selling Stockholders may offer the shares for resale from time to time. See
"Plan of Distribution." Except as described below, none of the Selling
Stockholders has had a material relationship with the Company within the past
three years other than as a result of the ownership of the Common Stock and
other securities of the Company.
The following table sets forth the names of the Selling Stockholders, the
number of shares of Common Stock owned beneficially by each of the Selling
Stockholders as of November 22, 1996, and the number of shares which may be
offered for resale pursuant to this Prospectus. For the purposes of calculating
the number of shares of Common Stock beneficially owned by the Selling
Stockholders, the number of shares of Common Stock calculated to be issuable in
connection with the conversion of the 7% Cumulative Preferred Stock, the
Convertible Preferred Stock and the Series 2 Preferred Stock is based on a
conversion price that is derived from the market price of the Common Stock as of
November 22, 1996. The calculation of the total number of shares of Common
Stock to be offered hereby, however, is based
15
<PAGE>
on a hypothetical market price of the Common Stock at the time of such
conversion of $5.00 per share, which price is below the market price of the
Common Stock as of November 22, 1996 (which was $5.125), and does not include
the 2,691,891 shares of Common Stock registered for resale by holders of the 7%
Cumulative Preferred Stock and one of the Company's suppliers pursuant to
Registration Statement No. 333-7369. The use of such hypothetical price is not
intended, and should in no way be construed, to constitute a prediction as to
the future market price of the Common Stock.
The information included below is based upon information provided by the
Selling Stockholders. Because the Selling Stockholders may offer all, some or
none of their Common Stock, no definitive estimate as to the number of shares
thereof that will be held by the Selling Stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of Common Stock offered under this Prospectus will be sold.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY SHARES OF STOCK BENEFICIALLY
OWNED PRIOR TO COMMON STOCK OWNED AFTER
NAME OFFERING/(1)(2)/ BEING OFFERED OFFERING/(3)/
- ------------------------------------------ ----------------- ------------- ------------------
<S> <C> <C> <C>
GFL Performance Fund Ltd./(4)/ 2,557,084 1,474,523 0
GFL Advantage Fund Ltd./ (4)/ 1,256,392 711,846 0
GFL Portfolio B/(4)/ 1,254,703 710,069 0
Atmel Corporation/(5)/ 370,488 370,488 0
Freight Solutions, Int./(5)/ 293,210 293,210 0
Petronic International, Inc./(5)/ 218,422 218,422 0
SAE Magnetics/(5)/ 992,717 992,717 0
Nelson Partners/(6)/ 1,220,097 1,243,111 0
Olympus Securities, Ltd/(6)/ 813,399 828,740 0
Rose Glen Funding, Inc./(6)/ 203,349 207,185 0
CYGNI S.A./(7)/ 306,071 313,725 0
Pangaea Fund Limited/(7)/ 428,499 439,216 0
Rutgers Casualty Insurance Co./(7)/ 76,519 78,432 0
American European Group /(7)/ 30,607 31,372 0
United International Insurance Co./(7)/ 45,911 47,059 0
Combination Inc./(7)/ 1,678,795 1,720,784 0
Burnstein & Lindsay Securities 214,249 219,608 0
Corp./(7)/
Futures Brokerage Inc./(7)/ 336,677 345,099 0
Biscount Overseas Ltd./(7)/ 474,409 486,275 0
TULA Business, Inc./(7)/ 306,071 313,725 0
Gross Foundation Inc./(7)/ 153,035 156,863 0
Maslo Fund Ltd./(7)/ 81,108 83,137 0
Black Inc./(7)/ 45,911 47,059 0
IBNS Manufacturing Co./(7)/ 76,517 78,432 0
Millenco, L.P./(7)/ 153,035 156,863 0
Ashline Ltd./(7)/ 1,193,673 1,223,529 0
Karlin Investments, Inc./(7)/ 520,319 533,333 0
Timboom Ltd./(7)/ 153,035 156,863 0
Museum Assets Ltd./(7)/ 1,193,673 1,223,529 0
Wharton Capital Partners Ltd./(7)/ 30,607 31,372 0
Wharton Capital Corporation/(8)/ 150,000 150,000 0
Wharton Capital International/(9)/ 50,000 50,000 0
State Capital Market Group, Ltd./(9)/ 50,000 50,000 0
---------- ----------
TOTAL 16,928,582 14,986,586
</TABLE>
16
<PAGE>
- -------------------
(1) Unless otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property
laws where applicable.
(2) As required by regulations of the Securities and Exchange Commission, the
number of shares shown as beneficially owned includes shares which can be
purchased within 60 days after November 22, 1996. The actual number of
shares of Common Stock beneficially owned is subject to adjustment and
could be materially less or more than the estimated amount indicated
depending upon factors which cannot be predicted by the Company at this
time, including, among others, the market price of the Common Stock
prevailing at the actual date of conversion of Preferred Stock, and whether
or to what extent dividends to the holders of certain Preferred Stock are
paid in Common Stock.
(3) Assumes the sale of all shares offered hereby and, in the case of GFL
Performance Fund Ltd., GFL Advantage Fund Ltd. and GFL Portfolio B, the
sale of all of such Selling Stockholders' shares of Common Stock registered
for resale by Registration Statement No. 333-7369 (respectively:
1,145,945; 572,973; and 572,973).
(4) The listed Selling Stockholders hold an aggregate of 18,956 shares of 7%
Cumulative Preferred Stock of the Company which are convertible into shares
of Common Stock. Each share of 7% Cumulative Preferred Stock is
convertible at a rate of (i) $1,000 divided by (ii) the lesser of (x)
seventy-seven percent (77%) of the average market price of the Common Stock
for the five consecutive trading days ending one day prior to the date a
conversion notice is received and (y) $11.00. The conversion price is
adjusted, and the number of shares beneficially owned by the Selling
Stockholder will vary accordingly, to reflect stock dividends, stock splits
and in certain other circumstances. The number of shares shown as being
offered in the table does not include 2,291,891 of such Selling
Stockholders' shares of Common Stock registered for resale by Registration
Statement No. 333-7369 and is based on (i) the assumed conversion of the
18,956 shares of 7% Cumulative Preferred Stock at hypothetical conversion
price of $3.85 per share (which is the conversion price based on a
hypothetical market price of $5.00), (ii) the actual conversion of 1,044
shares of 7% Cumulative Preferred Stock into 218,563 shares of Common
Stock -- 108,352 shares held by GFL Advantage Fund, Ltd. and 110,211 shares
held by GFL Portfolio B, and (iii) shares received as a dividend as of
August 31, 1996 as follows: 23,065 shares for GFL Performance Fund Ltd.,
11,532 shares for GFL Advantage Fund Ltd., and 11,532 shares for GFL
Portfolio B. Notwithstanding the foregoing, each listed Selling Stockholder
can convert 7% Cumulative Preferred Stock into, and receive dividends on
such Preferred Stock paid in the form of, shares of Common Stock only to
the extent that the number of shares issued thereby, combined with the
number of shares of Common Stock already held by such Selling Stockholder
and its affiliates, would not exceed 4.9% of the then outstanding Common
Stock, as determined in accordance with Section 13(d) of the Exchange Act.
For a further description of the rights of holders of 7% Cumulative
Preferred Stock see the Corrected Certificate of Designations, Preferences
and Rights of 7% Cumulative Convertible Preferred Stock, Series 1 and
related Registration Rights Agreement filed as exhibits to the Company's
Current Report on Form 8-K dated June 14, 1996.
(5) The listed Selling Stockholders hold shares of Common Stock received from
the Company in exchange for cancellation of certain trade payables of the
Company owed to such Selling Stockholder. Each of such Selling
Stockholders has executed a form of Securities Purchase Agreement and
related Registration Rights Agreement filed as exhibits to the Company's
Current Report on Form 8-K/A dated November 1, 1996. Each of such Selling
Stockholders is a vendor of the Company.
(6) The listed Selling Stockholders hold outstanding Stock Purchase Warrants to
acquire Common Stock at a price of $5.50 per share, and hold shares of
Convertible Preferred Stock of the
17
<PAGE>
Company, which are convertible into shares of Common Stock and additional
warrants to be issued at the time of such conversion. Each share of
Convertible Preferred Stock may be converted after December 15, 1996, into
a number of shares of Common Stock equal to (i) $1,000 plus an additional
fifty dollars for each year (pro rated on a daily basis for partial years)
between October 15, 1996, and the conversion date, (ii) divided by a
conversion price which is the lesser of $6.50 per share or 85% of the
average market price of the Common Stock on the five trading days prior to
the conversion. The conversion price is adjusted, and the number of shares
beneficially owned by the Selling Stockholder will vary accordingly, to
reflect changes in the market price of the Common Stock, stock dividends,
stock splits and certain other circumstances. Upon conversion of the
Convertible Preferred Stock, the holders of such stock shall receive, for
each three shares of Common Stock acquired through conversion, a warrant to
purchase an additional share of Common Stock at a price which is the lesser
of (a) $7.15 per share or (b) 110% of the average market price of the
Common Stock on the five trading days prior to the date of the related
conversion of the Convertible Preferred Stock. The number of shares shown
as being offered in the table is based on shares issuable directly upon
conversion, at a conversion price of $4.25 (which is the conversion price
based on a hypothetical market price of $5.00), upon exercise of the
warrants to be issued on such conversion and upon exercise of certain
outstanding Stock Purchase Warrants. Notwithstanding the foregoing, each
listed Selling Stockholder can convert Convertible Preferred Stock into
shares of Common Stock only to the extent that the number of shares issued
thereby, combined with the number of shares of Common Stock already held by
such Selling Stockholder and its affiliates, would not exceed 4.9% of the
then outstanding Common Stock as determined in accordance with Section
13(d) of the Exchange Act. For a further description of the rights of
holders of Convertible Preferred Stock see the Certificate of Designations,
Preferences and Rights of Convertible Preferred Stock, Series 1, and the
related Securities Purchase Agreement (with exhibits) filed as an exhibit
to the Company's Current Report on Form 8-K/A dated November 1, 1996.
(7) The listed Selling Stockholders hold shares of Series 2 Preferred Stock of
the Company, which are convertible into shares of Common Stock and
additional warrants to be issued at the time of such conversion. Each
share of Series 2 Preferred Stock may be converted after December 15, 1996,
into a number of shares of Common Stock equal to (i) $1,000, (ii) divided
by a conversion price, which is the lesser of $6.50 per share or 85% of the
average market price of the Common Stock on the five trading days prior to
the conversion. The conversion price is adjusted, and the number of shares
beneficially owned by the Selling Stockholder will vary accordingly, to
reflect changes in the market price of the Common Stock, stock dividends,
stock splits and certain other circumstances. Upon conversion of the
Series 2 Preferred Stock, the holders of such stock, or their designees,
provided such designees are "accredited investors," shall receive, for each
three shares of Common Stock acquired through conversion, a warrant to
purchase an additional share of Common Stock at a price which is the lesser
of (a) $7.15 per share or (b) 110% of the average market price of the
Common Stock on the five trading days prior to the date of the related
conversion of the Series 2 Preferred Stock. The number of shares shown as
being offered in the table is based on shares issuable upon conversion, at
a conversion price of $4.25 (which is the conversion price based on a
hypothetical market price of $5.00) and upon exercise of the warrants to be
issued on such conversion. Notwithstanding the foregoing, each listed
Selling Stockholder can convert Series 2 Preferred Stock into, and receive
dividends on such Preferred Stock paid in the form of, shares of Common
Stock only to the extent that the number of shares issued thereby, combined
with the number of shares of Common Stock already held by such Selling
Stockholder and its affiliates, would not exceed 4.9% of the then
outstanding Common Stock, as determined in accordance with Section 13(d)
of the Exchange Act. For a further description of the rights of holders of
Series 2 Preferred Stock see the Certificate of Designations, Preferences
and Rights of 5% Cumulative Convertible Preferred Stock, Series 2, and the
related Securities Purchase Agreement (with exhibits) filed as an exhibit
to the Company's Current Report on Form 8-K/A dated November 1, 1996.
(8) The Selling Stockholder has the right to acquire Common Stock pursuant to
certain Stock Purchase Warrants to purchase shares of Common Stock for
$7.15 per share. The Company granted such Stock Purchase Warrants as part
of the Selling Stockholder's compensation for its facilitation of certain
financing for the Company.
18
<PAGE>
(9) The Listed Selling Stockholders have the right to acquire Common Stock
pursuant to certain Stock Purchase Warrants to purchase shares of Common
Stock for $10.875 per share. The Company granted such Stock Purchase
Warrants as part of the Selling Stockholders' compensation for their
facilitation of certain financing for the Company.
PLAN OF DISTRIBUTION
The Company is registering the shares of Common Stock offered by the
Selling Stockholders hereunder pursuant to contractual registration rights.
The shares of Common Stock offered hereunder may be sold from time to time
by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. Such sales may be made on the Nasdaq National Market or
in the over-the-counter market or otherwise at prices and on terms then
prevailing or related to the then current market price, or in negotiated
transactions. The shares of Common Stock may be sold to or through one or more
broker-dealers, acting as agent or principal in underwritten offerings, block
trades, agency placements, exchange distributions, brokerage transactions or
otherwise, or in any combination of transactions.
In connection with any transaction involving the Common Stock, broker-
dealers or others may receive from the Selling Stockholders, and may in turn pay
to other broker-dealers or others, compensation in the form of commissions,
discounts or concessions in amounts to be negotiated at the time. Broker-
dealers and any other persons participating in a distribution of the Common
Stock may be deemed to be "underwriters" within the meaning of the Act in
connection with such distribution, and any such commissions, discounts or
concessions may be deemed to be underwriting discounts or commissions under the
Act.
Any or all of the sales or other transactions involving the Common Stock
described above, whether effected by the Selling Stockholders, any broker dealer
or others, may be made pursuant to this Prospectus. In addition, any shares of
Common Stock that qualify for sale pursuant to Rule 144 under the Act may be
sold under Rule 144 rather than pursuant to this Prospectus.
To comply with the securities laws of certain states, if applicable, the
Common Stock may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, shares of Common Stock may not be
sold unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with
under applicable state securities laws.
The Company and the Selling Stockholders have agreed, and hereafter may
further agree, to indemnify each other and certain persons, including broker-
dealers or others, against certain liabilities in connection with any offering
of the Common Stock, including liabilities arising under the Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Shartsis,
Friese & Ginsburg, LLP, San Francisco, California.
19
<PAGE>
EXPERTS
The consolidated financial statements of SyQuest Technology, Inc.
appearing in the SyQuest Technology, Inc. Annual Report (Form 10-K, as amended
by Form 10-K/A) for the fiscal year ended September 30, 1995, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
_______________________________
20
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION.............................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................... 3
THE COMPANY........................................................ 4
RISK FACTORS....................................................... 5
USE OF PROCEEDS.................................................... 15
SELLING STOCKHOLDERS............................................... 15
PLAN OF DISTRIBUTION............................................... 19
LEGAL MATTERS...................................................... 19
EXPERTS............................................................ 20
</TABLE>
14,986,586 SHARES
SYQUEST TECHNOLOGY, INC.
COMMON STOCK
__________________________
PROSPECTUS
__________________________
__________, 1996
___________________________________________
___________________________________________
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN
ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
_______________________________
21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Company in connection with the sale of
the Common Stock being registered. All the amounts shown are estimates except
for the registration fee.
<TABLE>
<S> <C>
Registration fee $23,700.38
Blue sky qualification fees and expenses -0-
Printing and engraving expenses 1,000.00
Legal fees and expenses 20,000.00
Accounting fees and expenses 40,000.00
Miscellaneous 1,000.00
----------
Total $85,700.38
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company has the power, pursuant to Section 102(7) of the Delaware
General Corporation Law, to limit the liability of directors of the Company for
certain breaches of fiduciary duty and, pursuant to Section 145 of the Delaware
General Corporation Law, to indemnify its officers and directors and other
persons for certain acts.
The Company's Restated Certificate of Incorporation includes the following
provisions:
The personal liability of the directors of the corporation for
monetary damages for breach of fiduciary duty as a director shall be
eliminated to the fullest extent permissible under Delaware law as the
same exists or as may hereafter be amended. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of any
matter occurring, or any cause of action, suit or claim that, but for
this Article would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
The corporation is authorized to provide indemnification of
officers, directors, employees or agents of the corporation for breach
of duty to the corporation and its stockholders through By-law
provisions or through agreements with such officers, directors,
employees or agents, or both, in excess of the indemnification
otherwise permitted by Section 145 of the Delaware General Corporation
Law, subject to the limits on such excess indemnification set forth in
Section 102(b)(7) of the Delaware General Corporation Law.
Pursuant to Section 145 of the Delaware General Corporation Law, a
corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses
II-1
<PAGE>
incurred by them in connection with any suit to which they are, or are
threatened to be made, a party by reason of their serving in such positions so
long as they acted in good faith and in a manner they reasonably believed to be
in, or not opposed to, the best interests of a corporation, and with respect to
any criminal action, they had no reasonable cause to believe their conduct was
unlawful.
The Company believes that these provisions are necessary to attract and
retain qualified persons as directors and officers. These provisions do not
eliminate liability for breach of the director's duty of loyalty to the Company
or its stockholders, for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, for any transaction from
which the director derived an improper personal benefit or for any willful or
negligent payment of any unlawful dividend or any unlawful stock purchase
agreement or redemption.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act.
Article VI of the Company's Bylaws provides that the Company, by action of
the Board of Directors, shall, to the fullest extent permitted by the General
Corporation Law of Delaware, indemnify any and all persons who it shall have
power to indemnify against any and all of the expenses, liabilities or other
matters.
The Company has entered into indemnification agreements with each of its
directors and executive officers which provide for mandatory indemnification and
advancement of legal expenses so long as the individual is entitled to
indemnification as determined in the manner provided in the agreement. The
burden is on the Company to establish the individual is not so entitled.
The Company has purchased and maintains an insurance policy covering the
officers and directors of the Company with respect to certain liabilities
arising under the Act or otherwise. Under the terms of their registration
rights agreements, certain of the Selling Stockholders may be obligated to
indemnify the Company and its directors and officers under certain circumstances
for liabilities under the Act.
ITEM 16. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company. Incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal period
ended September 30, 1995.
3.2 Amendment to Restated Certificate of Incorporation of the Company.
4.1 Corrected Certificate of Designations, Preferences and Rights of 7% Cumulative
Convertible Preferred Stock, Series 1. Incorporated by reference to Exhibit 3.1 of the
Company's Current Report on Form 8-K, dated June 14, 1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
4.2 Securities Purchase Agreement, dated as of May 31, 1996, by and among the
Company and holders of 7% Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K dated June 14, 1996.
4.3 Registration Rights Agreement dated as of May 31, 1996, by and among the
Company and holders of 7% Cumulative Convertible Preferred Stock, Series 1.
Incorporated by reference to Exhibit 10.2 of the Company's Current Report on
Form 8-K dated June 14, 1996.
4.4 6% Convertible Subordinated Debenture dated July 15, 1996. Incorporated by
reference to Exhibit 10.3 of the Company's Form S-3 Registration Statement
No. 333-7369 ("Registration 333-7369").
4.5 Registration Agreement dated July 15, 1996, among the Company and WISRS
(Malaysia) SDN.BHD. Incorporated by reference to Exhibit 10.4 of Registration 333-
7369.
4.6 Certificate of Designations, Preferences and Rights of Convertible Preferred Stock,
Series 1, as amended and agreed to be amended. Incorporated by Reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K/A dated November 1,
1996.
4.7 Certificate of Designations, Preferences and Rights of 5% Cumulative Preferred
Stock, Series 2. Incorporated by Reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
4.8 Securities Purchase Agreement dated as of October 8, 1996 among the Company and
the buyers of the Convertible Preferred Stock, Series 1 including the following
exhibits: Form of Warrant, Form of Registration Rights Agreement, Form of Escrow
Agreement and certain Schedules to the representations. Incorporated by Reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K/A dated November 1,
1996.
4.9 Securities Purchase Agreement dated as of October 8, 1996 among the Company and
certain buyers of the Series 2 Preferred Stock, including the following exhibits: Form
of Escrow Agreement, Form of Warrant, Form of Registration Rights Agreement and
certain Schedules to the representations. Incorporated by Reference to Exhibit 10.2 to
the Company's Current Report on Form 8-K/A dated November 1, 1996.
4.10 Securities Purchase Agreement dated as of October 8, 1996 among the Company and
certain buyers of the Series 2 Preferred Stock, including the following exhibits: Form
of Escrow Agreement, Form of Warrant, Form of Registration Rights Agreement and
certain Schedules to the representations. Incorporated by Reference to Exhibit 10.3 to
the Company's Current Report on Form 8-K/A dated November 1, 1996.
4.11 Securities Purchase Agreement dated as of October 8, 1996 among the Company and
certain buyers of the Series 2 Preferred Stock, including the following exhibits: Form
of Escrow Agreement, Form of Warrant, Form of Registration Rights Agreement and
certain Schedules to the representations. Incorporated by Reference to Exhibit 10.4 to
the Company's Current Report on Form 8-K/A dated November 1, 1996.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
4.12 Securities Purchase Agreement dated as of October 8, 1996 among the Company and
certain buyers of the Series 2 Preferred Stock, including the following exhibits: Form
of Escrow Agreement, Form of Warrant, Form of Registration Rights Agreement and
certain Schedules to the representations. Incorporated by Reference to Exhibit 10.5 to
the Company's Current Report on Form 8-K/A dated November 1, 1996.
4.13 Securities Purchase Agreement dated as of September 27, 1996, between the
Company and Atmel Corporation, including the exhibit Form of Registration Rights
Agreement. Incorporated by Reference to Exhibit 10.6 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
4.14 Securities Purchase Agreement dated as of October 18, 1996, between the Company
and Petronic International, Inc., including the exhibit Form of Registration Rights
Agreement. Incorporated by Reference to Exhibit 10.7 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
4.15 Securities Purchase Agreement dated as of October 24, 1996, between the Company
and SAE Magnetics (HK) Ltd., including the exhibit Form of Registration Rights
Agreement. Incorporated by Reference to Exhibit 10.8 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
4.16 Securities Purchase Agreement dated as of October 25, 1996, between the Company
and Freight Solutions International, including the exhibit Form of Registration Rights
Agreement. Incorporated by Reference to Exhibit 10.9 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
5.1 Opinion of Shartsis, Friese & Ginsburg, LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Shartsis, Friese & Ginsburg, LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney of certain officers and directors (included in Part II of the
Registration Statement.
</TABLE>
- -------------------
** Previously filed.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to provisions described in Item 15,
or otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided however, that paragraphs (1) and (1)(ii) do not apply if the
information required or to be included in a post effective amendment by these
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Act, each
filing of the Company's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont, State of California, on the 2nd day of
December, 1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edwin L. Harper
----------------------------
Edwin L. Harper,
President and Chief Executive Officer
Each person whose signature appears below constitutes and appoints
Edwin L. Harper and Henry Montgomery and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
in each of them, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-3 of SyQuest Technology, Inc., and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Edwin L. Harper President, Chief Executive Officer and Director December 2, 1996
- -------------------------- (Principal Executive Officer)
Edwin L. Harper
/s/ Henry Montgomery Executive Vice President, Finance and Chief December 2, 1996
- -------------------------- Financial Officer (Principal Financial and
Henry Montgomery Accounting Officer)
/s/ Edward L. Marinaro Chairman of the Board and Director December 2, 1996
- --------------------------
Edward L. Marinaro
/s/ C. Richard Kramlich Director December 2, 1996
- --------------------------
C. Richard Kramlich
/s/ David I. Caplan Director December 2, 1996
- --------------------------
David I. Caplan
/s/ Joseph Baia Director December 2, 1996
- --------------------------
Joseph Baia
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ------- ----------------------- ----------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company. Incorporated
by reference to Exhibit 3.1 of the Company's Annual Report on Form
10-K for the fiscal period ended September 30, 1995.
3.2 Amendment to Restated Certificate of Incorporation of the Company.
4.1 Corrected Certificate of Designations, Preferences and Rights of 7%
Cumulative Convertible Preferred Stock, Series 1. Incorporated by
reference to Exhibit 3.1 of the Company's Current Report on
Form 8-K, dated June 14, 1996.
4.2 Securities Purchase Agreement, dated as of May 31, 1996, by and
among the Company and holders of 7% Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K dated June 14, 1996.
4.3 Registration Rights Agreement dated as of May 31, 1996, by and
among the Company and holders of 7% Cumulative Convertible
Preferred Stock, Series 1. Incorporated by reference to Exhibit 10.2 of
the Company's Current Report on Form 8-K dated June 14, 1996.
4.4 6% Convertible Subordinated Debenture dated July 15, 1996.
Incorporated by reference to Exhibit 10.3 of the Company's Form S-3
Registration Statement No. 333-7369 ("Registration 333-7369").
4.5 Registration Agreement dated July 15, 1996, among the Company and
WISRS (Malaysia) SDN.BMP. Incorporated by reference to
Exhibit 10.4 of Registration 333-7369.
4.6 Certificate of Designations, Preferences and Rights of Convertible
Preferred Stock, Series 1, as amended and agreed to be amended.
Incorporated by Reference to Exhibit 3.1 to the Company's Current
Report on Form 8-K/A dated November 1, 1996.
4.7 Certificate of Designations, Preferences and Rights of 5% Cumulative
Preferred Stock, Series 2. Incorporated by Reference to Exhibit 3.2 to
the Company's Current Report on Form 8-K/A dated November 1,
1996.
4.8 Securities Purchase Agreement dated as of October 8, 1996, among the
Company and the buyers of the Convertible Preferred Stock, Series 1
including the following exhibits: Form of Warrant, Form of
Registration Rights Agreement, Form of Escrow Agreement and certain
Schedules to the representations. Incorporated by Reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K/A dated
November 1, 1996.
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ------- ----------------------- ----------
<C> <S>
4.9 Securities Purchase Agreement dated as of October 8, 1996, among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations. Incorporated by Reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K/A dated November 1, 1996.
4.10 Securities Purchase Agreement dated as of October 8, 1996, among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations. Incorporated by Reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K/A dated November 1, 1996.
4.11 Securities Purchase Agreement dated as of October 8, 1996, among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations. Incorporated by Reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K/A dated November 1, 1996.
4.12 Securities Purchase Agreement dated as of October 8, 1996, among the
Company and certain buyers of the Series 2 Preferred Stock, including
the following exhibits: Form of Escrow Agreement, Form of Warrant,
Form of Registration Rights Agreement and certain Schedules to the
representations. Incorporated by Reference to Exhibit 10.5 to the
Company's Current Report on Form 8-K/A dated November 1, 1996.
4.13 Securities Purchase Agreement dated as of September 27, 1996,
between the Company and Atmel Corporation, including the exhibit
Form of Registration Rights Agreement. Incorporated by Reference to
Exhibit 10.6 to the Company's Current Report on Form 8-K/A dated
November 1, 1996.
4.14 Securities Purchase Agreement dated as of October 18, 1996, between
the Company and Petronic International, Inc., including the exhibit
Form of Registration Rights Agreement. Incorporated by Reference to
Exhibit 10.7 to the Company's Current Report on Form 8-K/A dated
November 1, 1996.
4.15 Securities Purchase Agreement dated as of October 24, 1996, between
the Company and SAE Magnetics (HK) Ltd., including the exhibit
Form of Registration Rights Agreement. Incorporated by Reference to
Exhibit 10.8 to the Company's Current Report on Form 8-K/A dated
November 1, 1996.
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ------- ----------------------- ----------
<C> <S> <C>
4.16 Securities Purchase Agreement dated as of October 25, 1996, between
the Company and Freight Solutions International, including the exhibit
Form of Registration Rights Agreement. Incorporated by Reference to
Exhibit 10.9 to the Company's Current Report on Form 8-K/A dated
November 1, 1996.
5.1 Opinion of Shartsis, Friese & Ginsburg, LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Shartsis, Friese & Ginsburg, LLP. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney of certain officers and directors (included in Part II
of the Registration Statement.
</TABLE>
- -------------------
** Previously filed.
III
<PAGE>
Exhibit 3.2
AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF CONVERTIBLE PREFERRED STOCK, SERIES 1
OF
SYQUEST TECHNOLOGY, INC.
SyQuest Technology, Inc. (the "Company"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon the
Board of Directors of the Company by the Certificate of Incorporation, as
amended, of the Company, and by action taken by Unanimous Written Consent of the
Board of Directors of the Company dated as of October 30, 1996, in accordance
with and pursuant to section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Company adopted the following
resolution:
BE IT RESOLVED, that paragraph (6) of the Certificate of Designations,
Preferences and Rights of Convertible Preferred Stock, Series 1 of the Company,
filed with the Delaware Secretary of State on October 9, 1996, and amended on
October 15, 1996, be and it hereby is amended to read as follows:
(6) Reserved.
--------
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Edward L. Marinaro, its Chairman of the Board, as of the 30th day of October
1996.
SYQUEST TECHNOLOGY, INC.
By: /s/ Edward L. Marinaro
Chairman of the Board
Edward L. Marinaro
<PAGE>
Exhibit 5.1
November 22, 1996
SyQuest Technology, Inc.
47071 Bayside Parkway
Fremont, CA 94538
Re:SyQuest Technology, Inc. - Registration Statement on Form S-3
-------------------------------------------------------------
Ladies and Gentlemen:
We are counsel for SyQuest Technology, Inc., a Delaware corporation (the
"Company"), in connection with its Registration Statement on Form S-3, under the
Securities Act of 1933, as amended (the "Registration Statement"), to be filed
with the Securities and Exchange Commission, relating to 14,986,586 shares of
Common Stock, par value $.001 per share of the Company (the "Common Stock"). It
is our opinion that the shares of Common Stock to be offered and sold pursuant
to the Registration Statement, as issued, or when issued upon the conversion of
or in lieu of payment of cash dividends on certain shares of the Company's
Preferred Stock or the exercise of certain warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.1 of the Registration Statement.
Sincerely yours,
SHARTSIS, FRIESE & GINSBURG, LLP
By: /s/ Douglas L. Hammer
DOUGLAS L. HAMMER
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of SyQuest Technology,
Inc. for the registration of 14,986,586 shares of its common stock and to the
incorporation by reference therein of our report dated October 26, 1995 (except
for Note 4, as to which the date is December 27, 1995 and Note 12, as to which
the date is June 28, 1996), with respect to the consolidated financial
statements and schedule of SyQuest Technology, Inc. included in its Annual
Report (Form 10-K, as amended by Form 10-K/A) for the year ended September 30,
1995, filed with the Securities and Exchange Commission.
/s/Ernst & Young LLP
San Jose, California
November 21, 1996
